May 17, 2013

Written by

Detroit Free Press Staff Writer

Credit rating agency Moody’s highlighted in a weekly public finance report the financial troubles facing some school districts in Michigan.

Nearly 50 districts in the state are operating in a deficit. Moody’s rates 11 of them in its Michigan portfolio of more than 200 districts.

The reports says of the districts in its portfolio, the 11 “are most at risk of increasingly narrow cash flow margins as they approach statutory limits on cash flow borrowing and, absent further structural reforms, could become targets for state aid withholding.” The Michigan Department of Education can withhold state aid from districts without approved deficit elimination plans.

“While the withholding of aid provides the state with a strong tool to hold distressed districts accountable to a plan for financial recovery, the disruption in revenue presents a clear operating and credit risk,” the report reads.

Avondale Superintendent George Heitsch said the district is on track to successfully complete its 5-year deficit elimination plan, which ends in June 2014. He said the district in the past few years has closed an upper elementary school, seen savings from concessions in employee benefits and salaries and started sharing some services with other school districts.

“We’re getting healthier,” Heitsch said Friday.

One Michigan district – Buena Vista – closed down earlier this month when it ran out of money. Earlier this week, state officials approved the district’s deficit elimination plan, releasing state funding that had been withheld.